Investments in the hospitality industry

The lodging industry can present many attractive real estate investment, development, and ownership opportunities. However, for the uninformed investor or novicedeveloper, understanding this industry may seem like a daunting task. This study will start with a historical review of the development of thehospitality industry. Next, the focus of this study will shift to an in-depth explorationof an attractive segment within the lodging industry.
In reviewing the historical evolution of the hospitality industry, three significantinnovations will be identified as forces that have shaped and continue to shape theindustry. Application of the franchise business model to the hotel industry is the firstmajor innovation that is mentioned. The complex product and market differentiationprocess known as «segmentation» is the second important agent of change that hasexerted its influence from the very inception of the industry. The paper will describehow continuous product refinement has led hotel firms to strive toward optimaloperational efficiency in an effort to increase profits. The third and final innovationrepresents a generational «changing of the guard» within the hospitality industry. Asthe rising youth of the workforce and travel population gain market share, they bringunique lifestyle preferences. These preferences have shaped the supremely popularhotel environment dubbed the «life-style brand.»
Once these three innovations have been identified and explored, the study discusseshow they converge to form a specific hotel product. The study will break down thedevelopment and operational advantages of such a product, particularly as it relates tothe franchising of a national hotel brand.
Section Two of this study shifts perspective to investigate a typical development of aselect-service hotel product. This section serves as a pedagogical manual outlining howa hotel development of this type is executed from «cradle to grave.» Following achronological task list which serves as an outline for the second section, the studyexamines the deal pursuit process, the pre-development phase, the typical financingstrategies, and finally the pre-opening and operational stage of a select-service hoteldevelopment undertaking. This section also highlights the important and uniquerelationships and contracts that exist between the franchisor and franchisee, as well asthe traditional management agreements between the hotel owner and operator.

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